Are sweepstakes winnings taxable? Yes, sweepstakes winnings are considered taxable income by the Internal Revenue Service. When you win a sweepstakes, the full amount of your prize is subject to federal income tax, and depending on your state, you may also have to pay state taxes on your winnings. It is essential to report these earnings on your tax return, as failing to do so can lead to penalties. Additionally, the organization running the sweepstakes may withhold a portion of your winnings for taxes before you receive your prize. Always consult a tax professional to ensure compliance with tax laws.
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